As the landscape of employee benefits and wellness continues to change, one benefit that has recently caused some excitement for employees stands out: an employer student loan repayment benefit.
Student loan debt continues to be a significant issue for many Americans, with millions owing five figures or more on student loans. With so many needing debt relief, you can understand why employees are excited about companies offering a repayment benefit.
But what are student loan repayment benefits, and are they right for your company?
Employer student loan repayment is a benefit that some employers can offer where the company will put money directly towards repaying an employee's student loans.
While programs vary, from monthly contributions amounts to the lifetime maximum of the benefit, the core concept doesn’t change: employers trying to help employees pay off their student loans fast.
So what makes this kind of program so appealing for both employers and employees?
Tax Benefits of Student Loan Repayment Benefits
In December 2020, Congress passed the Consolidated Appropriations Act of 2021, which incentivized employers to pay off their employees’ student loan debt thanks to a tax break.
This new legislation allows employers across the country to make tax-free contributions of up to $5,250 a year to their employees’ student debt.
These payments aren’t included in the employees’ taxable income.
Does This Benefit Help Employers?
Most companies are willing to invest in better benefits for their employees, as long as the investment makes their workforce happier, more productive and less likely to find employment elsewhere.
Student loan repayment benefits have been shown to increase employee diversity, leading to a more diverse talent pipeline, and help retain employees longer.
Additionally, studies have shown employees suffering from financial stress are less likely to be productive and could be costing employers upwards of half a trillion dollars every year in a variety of costs.
How Much Are Employers Contributing?
While every student loan repayment program is slightly different, there are a few common themes.
For employers wanting to maximize the tax-free limit, you can either make one lump sum payment or make monthly payments equaling $437.50.
If this isn’t an option for your company, you can offer something closer to $25-50 per month for employees who want to enroll in the benefit. Some employers are even scaling payments based on tenure at the company, much like a typical increase in 401K matching.
What Types of Companies Are Offering Student Loan Repayment Benefits?
Due to the student loan crisis, companies of all sizes are rolling out student loan repayment benefits to their workforce. In reality, Fortune 500 companies to small family-owned businesses could improve employee retention and engagement by investing in this type of sought-after benefit.
Indeed, this could very well become a standard benefit in the future, especially for employers looking to retain diverse talent.
How Are Companies Paying for This Benefit?
So while you may be sold on this benefit for your workforce, there is always a question business owners and benefits managers have to ask: What about the cost?
Thankfully, the answer is a pretty straightforward.
In an effort to reduce costs while also greatly improving the benefits package for more employees, some companies are reallocating their benefits budgets on tuition reimbursement programs for employees who are going back to school and instead moving that money toward student loan repayment. Many workplaces don’t have enough employees taking advantage of tuition reimbursement benefits, while all employers have employees who are struggling with student loan debt.
Additionally, thanks to the previously mentioned legislation, employers can now redirect this budget to student loan repayment benefits, with no additional cost.
It should be noted, however, some companies can’t risk not having a benefit for tuition reimbursement for employees going back to school, especially in technical fields. Masters and higher education degrees can be important for employee retention and internal promotions, so weigh those decisions before relocating your budget.
Fund Your Student Loan Repayment Benefits by Cutting Unnecessary Costs
Now that you know how student loan repayment benefits can help your employees and your company, it’s time to find hidden costs that could be impacting your ability to provide the best possible benefits for your employees.
Are you curious to see if companies in your industry, region and similar employer size are offering student loan repayment benefits? Download your custom benefit benchmarking report to see how your benefits package compares.